Political power and risk sharing in an intermediary-led cooperative: Theory and empirical observations from China.

This article investigates how the balance of political power between farmer members and intermediary members influences profit and risk sharing within intermediary-led agricultural cooperatives in China. It develops a theoretical model showing that as farmers gain greater political influence, they receive higher profit shares through increased procurement prices and patronage refunds but also bear more risk, which can lead to constrained supply and reduced cooperative monopoly power. Empirical data from 187 cooperatives across three Chinese provinces reveal that official-led co-ops, where farmers have stronger representation, tend to provide higher patronage refunds and engage less in risky value-added activities compared to elite-led co-ops dominated by intermediaries. The findings highlight the importance of a balanced political power structure for sustainable cooperative growth in volatile markets, emphasizing that intermediaries’ risk-bearing capacity is crucial for accessing downstream markets while ensuring equitable profit distribution.